Asia-Pacific Transfer Pricing Handbook

Chapter Twenty-One

Malaysia Transfer Pricing Guidelines

The Government of Malaysia adopted its Transfer Pricing Guidelines on July 2, 2003.1 These transfer pricing parameters loosely follow the Organisation for Economic Co-operation and Development (OECD), Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations but provide innovative examples and other guidance. This guidance specifically addresses foreign-based multinationals in the Malaysian context. We also examine Malaysia’s advance ruling process effectively promulgated January 1, 2007, the specific advance rulings guideline procedure promulgated on February 14, 2008, and the limitations on that advance ruling process from a transfer pricing standpoint.

INTRODUCTORY PROVISIONS

Transfer pricing in Malaysia generally pertains to the pricing of cross-border transfers of goods, services, and intangibles.2 The Malaysia Transfer Pricing Guidelines address leasing only in passing; they fail to address intercompany loans and borrowing. The guidelines themselves are 31 pages in length. The Malaysia Transfer Pricing Guidelines, while acknowledging that transfer pricing can apply to transactions between associated enterprises within the same country, address only transactions between associated enterprises within a multinational business where one enterprise is subject to tax in Malaysia and the other enterprise is located overseas.3

The Malaysia Transfer Pricing Guidelines would apply to the taxpayer by analogy ...